The clock is ticking as the end of financial year fast approaches. Detailed below are some timely reminders and tips for business owners to get their tax in order before 30 June.
Superannuation Guarantee Rate Increasing to 10.5%
The superannuation guarantee rate will increase to 10.5% with effect from 1 July 2022 please ensure you update your payroll systems accordingly and budget for the increase expenditure. Also whilst many employers will not pay their June quarter superannuation until 28 July consider making the payment before 30 June to get your tax deduction in the current financial year.
Temporary Full Expensing Measures Extended to 30 June 2023
The temporary full expensing of assets measures has been to 30 June 2023. This enables qualifying businesses (turnover of less than $5 billion) to claim for a full deduction for most depreciable assets they acquire for business purposes.
Loss carry back rules
Companies that have made tax losses in 2020, 2021 or 2022 financial years may be eligible to reclaim company tax paid in prior years if the company;
- had an income tax liability for the 2019, 2020 or 2021 financial years; and
- has met its income tax obligations.
Note that the amount refundable will be limited to the balance of the company’s franking account (i.e. company tax previously paid).
Most businesses operate and report their income based on invoices issued. Whilst maintaining a keen eye on cashflow the impact of issuing invoices into the next financial year means tax won’t be payable on that income until the next financial year.
Trading stock can be valued at the lower of cost, market value or replacement value for tax purposes each year. Undertaking an effective stocktake can identify obsolete stock which can be written off or at the very least written down to clearance prices, reducing your taxable profit.
Be mindful of any income that you invoice for services which you provide post 30 June. Depending upon the terms and conditions of your agreement whilst the income may be invoiced prior to 30 June if the services are provided after you may be able to defer the recognition of that income until the new financial year.
Bad Debts – Write off
Review your debtors prior to 30 June and where there is no or minimal chance of recovery, write the debts off prior to 30 June so that you are not paying tax on those amounts you won’t receive.
120% Write-Off IT Expenses
Businesses with aggregated annual turnover of less than $50 million will be able to deduct 120% of the costs incurred from 29 March 2022 to 30 June 2023 on business expenses and depreciating assets that support their digital adoption subject to an annual cap of $100,000. Eligible costs include portable payment devices, cyber security systems or subscriptions to cloud-based services.
120% Write-Off Skills & Training
Businesses with aggregated annual turnover of less than $50 million will be able to deduct 120% of the costs incurred from 29 March 2022 to 30 June 2023 incurred on external training courses provided to their employees subject to an annual cap of $100,000.
The external training courses will need to be provided to employees in Australia or online and be delivered by entities registered in Australia.
Withholding Tax on Payments
Ensure that when you are making payments (particularly to individuals) that you have made the appropriate PAYG (Pay as you Go) withholding from the payment. With effect from 1st July 2019 a failure to withhold the correct amount from such payments will make the amount not tax deductible.
Research & Development Tax Incentive
Companies that spend money on eligible Research & Development activities may be eligible for a refundable or non-refundable tax offset. Note that the expenditure must be paid prior to 30 June and that registration with AusIndustry must occur 10 months after end of financial year (usually 30 April).
Export Market Development Grant
The Federal Government provides for financial assistance for exporters by reimbursing up to 50 per cent of eligible export promotion expenses (above $5,000) provided there is a minimum spend of $15,000.
The grant applies to Australian businesses with a turnover of less than $50 million and must have promoted either, export of goods or services, inbound tourism, export of intellectual property or conferences and events held in Australia. Note that the rules changed in 2022 and applicants enter into a grant agreement and subject to satisfying the conditions of that agreement are provided funding.